The ’718 patent is entitled “Light-emitting diode with an electrically conductive window” and is directed to an LED with a transparent window layer on top of the active semiconductor layers.
The transparent window layer (24) overlays the LED’s active p-n junction layers (21, 22, 23) of AlGaInP. The transparent window layer (24) is made of a different semiconductor than the active layers, with a low resistivity and a bandgap greater than the active layers.
As a result, the window layer (24) is transparent to light emitted by the p-n junction layers and therefore generates more uniform light emission and improves the efficiency of the LED.
In 2005 Lumileds filed suit against Epistar and United Epitaxy Company (UEC) in the U.S. International Trade Commission (ITC) alleging infringement of the ’718 patent. Later that year, UEC merged into Epistar and ceased to exist as a separate entity.
Epistar has continued to manufacture certain UEC LED products, as well as its own AlGaInP LEDs.
Prior to the merger, back in 2001, UEC had settled another lawsuit with Lumileds involving the ’718 patent, and the settlment agreement provided that UEC and its successors could not challenge the validity of the patent.
A third lawsuit between Lumileds and Epistar in 2003-04 also ended with a settlement agreement. Under that agreement, Epistar took a license to make particular LEDs, and with respect to those products, promised not to challenge the validity of the ’718 patent.
The agreement was silent with respect to non-licensed products, preserving Epistar’s right to challenge the ’718 patent’s validity if Lumileds were to sue Epistar for infringement of other products in the future.
In the ITC case Lumileds moved for a summary determination that Epistar could not challenge the validity of the ’718 patent and argued that the merger with UEC bound Epistar to the UEC settlement agreement, which prohibited such a challenge.
An ITC administrative law judge (ALJ) granted the motion, ruling that the UEC-Lumileds agreement precluded Epistar from contesting the validity of the ’718 patent with respect to any UEC or Epistar product.
Although the ALJ later acknowledged there were two separate settlement agreements at issue, by that time the ALJ found it was procedurally too late to change his ruling.
Epistar was subsequently found liable for infringement of the ’718 patent, and the ITC issued a limited exclusion order excluding from entry into the U.S. Epistar’s infringing LED products. The exclusion order included downstream packaged LEDs containing the infringing LEDs regardless of the manufacturer or importer of these products.
Epistar appealed to the U.S. Court of Appeals for the Federal Circuit. Last month, the Federal Circuit reversed the ITC rulings on the validity preclusion and the exclusion order.
The Federal Circuit discussed the two separate settlement agreements of UEC and Epistar and held that, with respect to its own products, Epistar could challenge the validity of the ’718 patent:
This court finds that Epistar’s right to contest validity of the ’718 patent with respect to its products is governed by its own separate agreement with Lumileds. . . .When Lumileds settled with Epistar, the settlement agreement addressed only the licensed products and thereby preserved Epistar’s unrestricted right to contest the validity of the patent in other contexts. This court cannot allow Lumileds to escape its agreements due to a merger that does not disturb its contract with Epistar.
Epistar could be precluded from challenging validity only as to the UEC products:
Epistar (as successor to UEC) may not contest the validity of the ’718 patent with respect to the UEC products that it inherited in the merger.
The Federal Circuit also vacated the exclusion order and instructed the ITC to reconsider the order based on recent precedent holding that the ITC lacks statutory authority to exclude imported products by entities not named as respondents before the ITC.
The court found that Epistar does not itself manufacture downstream products; instead other foreign entities incorporate the infringing LEDs in packaged LEDs and LED boards for importation into the U.S.